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Tax evasion by multilateral corporations bleeds African revenue— Panelists

Published

1 year ago

September 1, 2023

A panel of experts at the third African Conference on Debt and Development (AfCoDD III) have argued that multilateral corporations in Africa are reported to be using the informal sector to evade tax.

As the executive director of Tax Justice Network Africa, Chennai Makumba, who was one of the panellists, noted that multilateral corporations were leveraging the informal sector to escape taxes, which was one of the reasons African nations were struggling to raise domestic resources.

According to estimates from the United Nations Conference on Trade and Development (UNCTAD), Africa loses significant resources as a result of illegal money flows (IFFs). These flows come from a variety of sources, including money made from criminal activity, tax evasion, profit-shifting abuse, trade mis-invoicing, and corruption, among others.

“Need to look at the structure of our economies, many of them have informal services and governments are struggling with how to capture these informal services sector.

“Certain companies use the informal sector to evade taxes, these are corporates hiding behind the informal sector that we need to target. Africa is losing about US$90 billion on an annual basis due to revenue loss,” Makumba said.

Briggs Bomba from Trust Africa, a different panellist, stated that the time had come for Africa to consider major ideas that would revolutionise the continent. Bomba emphasised the necessity for big-picture thinking in order to find solutions to the problems the continent was currently facing.

“This is a moment for Africa to manage our way and ideas and think big and outside the limitations of the ideas and out forwards ideas to help us. We should not be shy as activists in terms of these big ideas,” he said.

One of the techniques of most multilateral cooperations in this regard is “trade mispricing”: a situation where a company artificially sets the prices for goods or services sold between its subsidiaries to avoid taxation. Another approach to it is lobbying for tax breaks as a reward for basing or retaining their business in African countries.

Tax regimes across the continent have been observed as possible factors for the decline in investment, and public revenue shortage that hinders development. Senegal, Kenya, and Nigeria are among the countries that recently announced tax reforms. But beyond the expansion of the tax net to include more “common men” or the middle class, policy efforts must be driven to capture what’s due to the state from corporate citizens like multilateral cooperations.

Related Topics:Africa Featured multilateral corporations Tax evasion

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IMF mission concludes 4th loan program assessment in Egypt

Published

1 day ago

November 22, 2024

Ifeoluwa Dada

Following the completion of a recent visit to Egypt, the International Monetary Fund (IMF) has announced that its mission had achieved significant strides in policy talks aimed at concluding the fourth review of the IMF loan program.

The review is the fourth in Egypt’s most recent 46-month IMF loan program, which was authorised in 2022 and increased to $8 billion this year following an economic crisis characterised by high inflation and chronic foreign exchange shortages. It may unleash more than $1.2 billion in financing.

Along with reaffirming its commitment to maintain a flexible exchange rate system, the IMF stated that Egypt “has implemented key reforms to preserve macroeconomic stability,” including the unification of the currency rate that facilitated imports.

Earlier on Wednesday, Egypt’s Prime Minister Mostafa Madbouly said Cairo has asked the IMF to modify the targets for the programme not only for this year, but for its full duration, he added without giving more details.

“Discussions will continue over the coming days to finalize agreement on the remaining policies and reforms that could support the completion of the fourth review,” the IMF added in its statement.

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Kenya seeks $750m from World Bank, obtains $200m from AfDB— Official

Published

3 days ago

November 20, 2024

Ifeoluwa Dada

The head of debt management for the finance ministry told Reuters that Kenya had obtained a $200 million loan from the African Development Bank (AfDB) and was negotiating a fresh $750 million loan with the World Bank.

After being forced to abandon proposed tax rises costing more than 346 billion shillings ($2.68 billion) in June due to fatal demonstrations, the East African nation’s administration, which has been grappling with significant debt, has been frantically seeking fresh funding.

The Finance Ministry’s public debt management office director general, Raphael Owino, told Reuters that the IMF’s October clearance of the seventh and eighth reviews, which opened the door for a $606 million loan tranche, had aided the ministry’s talks for more loans.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

The discussions for more assistance, which came under the World Bank’s “Development Policy Operations” (DPO) with the government, were confirmed by a representative at the organization’s Kenya office.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

In May, the World Bank approved the latest round of DPO loans, totalling $1.2 billion.

According to a statement made last month by Finance Minister John Mbadi, Kenya has set a foreign borrowing goal of 168 billion shillings for the fiscal year ending in June 2025.